Does Your Dog Eat Organic? Meet The 'Human Grade' Pet Food Startup

Brian SolomonForbes Staff

The Honest Kitchen proves there’s no limit to what Americans will spend on their pets.

Willow and Taro Postins come to work every day at The Honest Kitchen’s San Diego headquarters in the shadow of Petco Park. Their boss and adoptive mother, Lucy Postins, concedes that neither is an ideal employee. They rarely follow instructions, gently harass visitors and fight openly in the hallway.

Of course, Willow and Taro are Postins’ dogs, purebred Rhodesian Ridgebacks whose ancestors were raised to hunt lions, not perform office tasks. And they’re just 2 of the 12 canines who roam the office, nearly as numerous as the 23 human employees. At The Honest Kitchen, “Must love dogs” is an actual job requirement.

That’s because Postins is on a mission to sell pet food that she claims is above and beyond the quality of even the most luxurious kibble. It says so right on the box, which proclaims that the food within is “Human Grade.” The dehydrated substance looks like granola put through a blender–just add water–but the ingredient list sounds like it comes from a four-star, farm-to-table restaurant: free-range chicken, cage-free duck, sweet potatoes, pumpkin, cranberries.

“They’re the same ingredients that I feed my human family,” says Postins, 40. “To me it’s not gourmet, it’s just common sense.”

Postins, who founded the company 13 years ago in her kitchen, isn’t marketing to the average pet owner. She’s looking for dog and cat lovers who shop at Whole Foods and wouldn’t serve nonorganic, genetically modified food to their human families. So far, of the $20 billion pet food market, The Honest Kitchen has captured $21 million in annual revenue, and the company projects growth of nearly 50% this year.

While going upmarket has long been a lucrative strategy in pet food, Postins’ tactics take a page from the human food playbook. Just as startup brands are beating industry giants like Kraft Foods KRFT -0.12% and Campbell’s Soup by hawking healthier and more natural options, The Honest Kitchen and others, such as Blue Buffalo, which recently filed to raise as much as half a billion dollars in an IPO, have challenged the pet establishment. The Honest Kitchen is testing the limits, charging up to $120 for a 10-pound box of dog food (that becomes 40 pounds with water).

Early on Postins had no idea such a market existed. The U.K. native settled in San Diego in 1998, following her husband, Charlie, who was designing cars for Nissan. While a marketing manager at premium-kibble-maker Solid Gold, Postins read online that a raw diet might alleviate the persistent ear infections suffered by Mosi, her previous Ridgeback. The fad, which veterinary experts question, encourages owners to serve animals uncooked vegetables and meat, supposedly replicating what their ancestors ate in the wild.

The Honest Kitchen’s grain-free recipes are more expensive.

But serving raw ingredients at home can be expensive, messy and even dangerous because of the bacteria. Postins wondered whether a dehydrated form might work–and began to see the potential for a microbusiness that would sell her concoctions mostly to friends. With no professional experience, she cold-called dehydrated-food production plants. Most turned her down, worried that their human clients would freak out if they knew the facilities were also being used to prepare dog food.

In 2002, after Charlie extended a $7,000 seed loan, Lucy quit her day job, but the first production effort failed. Her vision was muesli-like, with recognizable chunks of food. Instead, the manufacturer pulverized her expensive meats and vegetables (which Postins says cost at least twice as much as typical pet food ingredients) into what looked like a fine flour. After figuring out production, she began passing out samples at local dog parks. Then in September 2002 she put up a website and was stunned to get a quick online order from a customer in North Carolina. She was so excited that she spent $38 to overnight $32 worth of product.

Postins spent the next two years operating The Honest Kitchen out of her home, even packing boxes in the garage the night before giving birth to the first of her two children. In 2007, after the business began shipping 220 orders per week, Charlie quit his job at Nissan to help shore up the operation, which by then had eight employees. Six months later he had to take a consultant gig to help pay the bills. “Lucy had done an incredible thing getting us to this point, but there was an obvious need for development of the business,” says Charlie, now the full-time president and second-in-command to his CEO wife.

The operational struggles continued. In 2009, when Postin’s first CFO wasted $250,000 on an expensive data-processing software system too advanced for their fledgling operation, Postins cried when she briefly feared she might not make payroll for her ten employees. It was, she believes, her insistence on maintaining the human-grade label, implying a level of quality beyond competing products, that saw The Honest Kitchen through its growing pains.

Lucy Postins with Willow and Taro, her Rhodesian Ridgebacks. (Credit: Ethan Pines for Forbes)

To maintain the label, the company has to comply with strict regulatory oversight of its sourcing and production. But not everyone believes those efforts have value. Dr. Lisa Freeman, professor of nutrition at the Cummings School of Veterinary Medicine at Tufts University, says the fancy ingredients are likely no better for pets than less expensive food. “There are many myths across the pet industry these days,” says Dr. Freeman. “Ingredient lists are just marketing, and unfortunately consumers are basing their decisions on that marketing.”

Postins does in fact spend $1.2 million a year on marketing. Despite working in an office a block from a baseball stadium named for Petco, she refuses to distribute through that or any of the big chains, choosing instead to sell only online and through independent pet stores.

In 2011 The Honest Kitchen brought in investors, raising $5 million in two funding rounds led byAlliance Consumer Growth, a backer of high-end burger chain Shake Shack. The investment allowed Postins to hire professional staff, increasing her head count to 40, including 15 salespeople. She hopes to return to profitability this year but says the company will never shed its “pets before profits” ethos. In fact, she recently spiked a potentially lucrative deal with a distributor in Japan. The reason? It sells to stores that carry dogs raised in puppy mills.

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